UK's Persimmon warns of profit fall, slashes dividend by 75%

By Aby Jose Koilparambil and Suban Abdulla

(Reuters) -Persimmon warned on Wednesday Britain's slowing housing market would hit annual profits and home-building targets as it slashed its dividend by 75%, sending its shares sharply lower.

Britain's housing market has slowed markedly in recent months as higher mortgage rates and broader economic concerns deter buyers. Data from mortgage lender Nationwide on Wednesday showed house prices fell in annual terms for the first time since June 2020, with prices down 1.1% last month.

"The sales rates seen over the last five months mean completions will be down markedly this year and ... so will margin and profits," Persimmon Chief Executive Dean Finch said, adding it was too early to provide any firm forecast.

The FTSE 100 company proposed a final dividend of 60 pence per share for fiscal 2022 as per its new capital allocation policy. Persimmon has paid an annual dividend of 235 pence per share for the last five fiscal years except one, when pandemic lockdowns disrupted operations.

Analysts had said in January that British housebuilders might cut dividends to preserve cash and ride out the property downturn.

"Seeing the distributions reduced to 60 pence is disappointing but is a reset to an affordable figure – even in tough trading conditions, this will be more than covered by EPS (earnings per share) – and leaves room for growth," said Oli Creasey, equity research analyst at Quilter Cheviot in a note.

Persimmon stock slid as much as 10% to a near seven-week low of 1,310 pence and was the top percentage loser on the blue-chip FTSE 100 index.

Shares in the housebuilders' index declined 3.64%, with Persimmon's rivals dropping between 1.5% and 3.7% after a Telegraph report said Britain's competition regulator had launched a probe into consumer protection for renters.

Persimmon said its average net private weekly sales rate was 0.52 in the first eight weeks of 2023, compared with 0.96 a year earlier, but improved from 0.30 in fourth quarter.

The company's forward order book so far in 2023 is about 30% lower year-on-year and it expects to build 8,000 to 9,000 homes in 2023, compared with the 14,868 constructed a year earlier.

Persimmon's underlying pretax profit rose 4% to 1.01 billion pounds ($1.22 billion) in the year ended Dec. 31, beating analysts' estimates of 983.4 million pounds, according to Refinitiv data.

($1 = 0.8298 pounds)

(Reporting by Aby Jose Koilparambil in Bengaluru and Suban Abdulla in London; Editing by Shounak Dasgupta and Mark Potter)